Atlas Shrugged

This is a somewhat unusual post, as it is really a review of a book, and the relevance of the book to the situation today. The book is Atlas Shrugged, by Ayn Rand. I am now three quarters of the way through the book, but could not quite resist reviewing the book so far, as there are elements that are relevant to the world of today. I understand that the book is also being made into a two part film (it is a very long book), and will be interested to see how they interpret the work.

As mentioned, the first point about the book is it is very, very long. In places, unnecessarily so. Ayn Rand was an immigrant to the US, and there are times that this shows through in the language. There are certainly moments when I became irritated with the writing style (the overuse of the word ‘astonished’ was one example). However, and bearing in mind that I have a tendency towards being a little verbose, I should stress that this is not a huge problem.

As to the content, there is both good and bad. There is an element of caricature in the characters, and moments that are a little too much towards Mills and Boon. Notwithstanding this, the book has a lot to say that is relevant today, and perhaps that is why the book is being made into a film. The plot is quite straightforward, and I will use Wikipedia for a summary (sorry it is long):

As the novel opens, protagonist Dagny Taggart, the Operating Vice President of Taggart Transcontinental, a giant railroad company originally pioneered by her grandfather, attempts to keep the company alive during difficult economic times marked by collectivism and statism. While Dagny runs the company from behind the scenes, her brother, James Taggart, the railroad’s President, is peripherally aware of the company’s troubles but will not make any difficult choices, preferring to avoid responsibility for any actions while watching his company go under. He seems to make irrational decisions such as preferring to buy steel from Orren Boyle’s Associated Steel, rather than Hank Rearden‘s Rearden Steel, despite the former continually delaying delivery of vital rail. In this as in other decisions Dagny simply goes ahead with her own policy and challenges him to repeal it. As this unfolds, Dagny is disappointed to discover that Francisco d’Anconia, a true genius and her only childhood friend, first love, and king of the copper industry, appears to have become a worthless playboy who is destroying his family’s international copper company, which has made him into one of the richest and most powerful men in the world.

Hank Rearden, a self-made steel magnate of great integrity, has recently developed a metal alloy called Rearden Metal, now the strongest and most reliable metal in the world. Hank chooses to keep the instructions to its creation a secret, sparking jealousy and uproar among competitors. False claims are made about the danger of the alloy and are backed by government agencies. As a result of this, pressure is put on Dagny to use conventional steel but she refuses. Hank’s career is hindered by his feelings of obligation toward his manipulative wife, mother, and ungrateful younger brother, who show no appreciation for everything he provides for them. Dagny also becomes acquainted with Wesley Mouch, a Washington lobbyist initially working for Hank Rearden, whom he betrays. Mouch eventually leads the government’s efforts in controlling all commerce and enterprise, intentionally destroying the common man’s opportunity to build a largely successful, free market business. The reader also becomes acquainted with Ellis Wyatt, the sole founder and supervisor of the successful enterprise Wyatt Oil. He is a young, self possessed, hard-working man–one of the few men still loyal to Dagny and Hank’s efforts in pushing for a system of business free of government meddling and control.

While economic conditions worsen and government agencies continue to enforce their control on successful businesses, the naïve, yet weary mass of citizens are often heard reciting the new, popular street phrase, “Who is John Galt?” This sarcastic phrase is given in response to what tend to be sincere questions about heavy subjects, wherein the individual can find no answer. It sarcastically means, “Don’t ask important questions, because we don’t have answers”, or more broadly, “What’s the point?” or “Why bother?”
Dagny begins to notice the nation’s brightest innovators and business leaders abruptly disappearing, one by one, under mysterious circumstances, all leaving their top industrial businesses to certain failure. The most recent of these leaders to have vanished is Dagny’s friend Ellis Wyatt, who, like the others, has suddenly disappeared into thin air with no warning, leaving nothing behind except an empty office and his most successful oil well now spewing petroleum and fire high into the air (later to be named “Wyatt’s Torch”). Each of these men proves to be absent despite a thorough search put on by ever-anxious politicians, who’ve now found themselves trapped within a government that has been “left to dry”, by its leaders in business — utterly helpless without them.

In a romantic subplot, Dagny and Hank fall deeply in love. Rand refers to their love as a purer kind of love than the one that most men and women experience. These two people have a similar purpose in life, and they see in each other a kindred soul. In the universe of the novel, men and women with purpose are rare and, to an extent, deified — thus making their love especially sacred. Hank and Dagny go on a vacation drive across the USA. They discover, amongst the ruins of an abandoned factory, an incomplete motor that transforms atmospheric static electricity into kinetic electricity. Deeply moved by the significance of a motor which has the potential to completely transform the world, Dagny sets out to find the inventor.
In the final section of the novel, Taggart discovers the truth about John Galt, who is leading an organized “strike” against those who use the force of law and moral guilt to confiscate the accomplishments of society’s productive members. With the collapse of the nation and its rapacious government all but certain, Galt emerges to reconstruct a society that will celebrate individual achievement and enlightened self-interest, delivering a long speech (seventy pages in the first edition) serving to explain the novel’s theme and Rand’s philosophy of Objectivism, in the book’s longest single chapter.^[21]

Whilst reading the book, it is impossible not to miss the comparisons with the world of today. In the book, the corruption of the world of industry is one in which favoured Washington insiders gain favours and run their businesses into the ground, all with the support of the government. When thinking of the too big to fail banks, the comparisons are clear. Similarly, the rescue of GM and other failing firms, as well as the Solyndra scandal, are all similar in principle. However, the other point of comparison is more general, which is the obsession with corporate social responsibility, and the pressures being placed upon companies to conform to vague concepts of doing social good. As Rand argues persuasively throughout the book, provided that a company is succeeding on its own merits (i.e. without state support), the employment and output of goods/services that the company provides is sufficient social good of itself.

It was this aspect of the book that was very striking for me. Although I have not done so in this blog, I have on occasion railed against the concept of corporate social responsibility. One particular bugbear is when public companies provide support for charities. This gives a glow for the management of the company, when they give large sums of money, and the CEO will undoubtedly receive acclaim for his generosity to the charity. However, the problem is that it is not the CEO who is being generous, but the shareholders of the company, who see their money being given away without their consent, and who receive none of the acclaim. I would guess, if actually asked, many shareholders might approve of the donations. However, if the questions were asked as to whether they would personally give their own money to charity x, in preference to charity y, then they would probably disagree with donation.

The other point is the incessant bullying of companies by various NGOs, often with the media acting as cheerleaders for the NGOs. Instead of facing down the NGOs, businesses do not have the guts to say ‘no’ to their incessant demands. I think of one particular example of this bullying, which was the use of palm oil by Cadbury, due to the linkage between palm oil and deforestation. This caused a storm, but in what way is Cadbury responsible for deforestation? The responsibility for this lies in the political structure of the country in which the deforestation is taking place. If the NGOs believe that it is wrong to deforest, their target should be the politicians in the country in question. It is not the responsibility of a company, it is the responsibility of the politicians. The role of a company is to act in the interests of shareholders, not some wider societal good that is determined by a particular interest group. Furthermore, who do these interest groups actually represent? It is not as if they are representative of society, they are not in this sense democratic, but are instead a self-selecting group that represent only themselves.

In this sense, Atlas Shrugged eerily parallels the world of today. People seem to have forgotten that the purpose of business is to produce stuff, and to make profits for the shareholders, and this should be the limit of the business. This is enough good to do in the world. This is not to say that a business might not generate external costs, such as pollution, but these ‘externalities’ are the matter of reasonable legislation of government, which should ensure that they are met with fair law and regulation that genuinely reflects the costs imposed upon society. A company is a part of society – how can it not be – but its role is not to do abstract social good, but to produce goods and services, whilst employing people along the way. One disturbing manifestation of this can be found in much of the business literature, and that is the use of the term ‘stakeholder’. This is the idea that companies are not just accountable to their shareholders, but to anyone who might have an interest in the company, such as suppliers, NGOs, government, employees and so forth. Apparently, as is implied in the term, they have a ‘stake’ in the company.

But do they? They have not put their money into the company. They do not own it. In many cases, with public companies, the actual owners of the company are pension funds, and the investment funds of ordinary people. These owners of the company should be the only interest of the management. For example, they have no obvious obligations to their suppliers, except to pay them for the goods or services that they supply. They certainly have no obligations to NGOs. For the government, they only have an obligation that they pay their taxes, and operate within the bounds of fair laws that constrain the company from imposing external costs (such as pollution) upon society in the broad. The claim that these different groups hold a ‘stake’ in the company is to suggest that they have rights that are comparable with the owners of the company. This is the undermining of the principle of property rights. As Ayn Rand puts it, it is ‘looting’.

Another point made in Atlas Shrugged is the role of the academic world in the corruption of the role of business. The idea of stakeholders can be found in academic literature, as well as reams of material on corporate social responsibility, and other equivalent ideas. Academia appears as a cheerleader for these concepts, and provides an intellectual gloss for activity which seeks to undermine the rights of the owners of property, the shareholders, in favour of self-aggrandising management, and the nebulous notion of stakeholders. They dress this up in the clothes of ethics, but how is it ethical for a CEO to take all of the social praise, from the media and luminaries, for spending money that should rightfully (for example) be returned to a shareholder as part of their pension. Again, as Ayn Rand puts it, it is looting. And it is looting that the vast majority of society cheers about.

Even the shareholders of a company might cheer this corruption on, with no realisation of how much money they are losing as they do so. This is another element of Atlas Shrugged. With the media, the government, and academia all singing from the same hymn-sheet, the real costs of the distortions to business, the immoral nature of the looting, is lost from sight. In the book, the costs lead to a horrific decline in the standards of living of everyone, as the concept of the social good comes to dominate business, but the link between the decline in living standards is not linked to the distortion of the priorities of business. Instead, the problems of business give greater excuse for yet more intervention in business for the ‘social good’, creating a downwards spiral. Today, the role of social good as an impediment to the proper operation of business is there, but is in no way as extreme as in Atlas Shrugged. However, it is impossible not to notice that the pattern and direction in the Western world is leading towards the dystopia that is the subject of Atlas Shrugged.

In short, there is much to recommend Atlas Shrugged. The purpose of a company is that it is there to generate the wealth that allows us to have a better standard of living. That is enough.  It is the point that shines most brightly in Atlas Shrugged.

Read more at Cynicus Economicus